47. Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year. Activity Cost Pool Cost Driver Est. Overhead Cost Driver Activity Ordering and Receiving Orders $ 120,000 500 orders Machine Setup Setups 297,000 450 setups Machining Machine hours 1,500,000 125,000 MH Assembly Parts 1,200,000 1,000,000 parts Inspection Inspections 300,000 500 inspections If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is a. $9.60. b. $12.00 c. $15.00. d. $34.17 at Thinking AICPA FN: Measurement, AICPA PC: 4 - 16 Test Bank for Managerial Accounting, Seventh Edition 74. Noland Company manufactures two models of its banjo, the Basic and the Luxury. The Basic model requires 10,000 direct labor hours and the Luxury requires 30.000 direct labor hours. The company produces 3,400 units of the Basic model and 600 units of the Luxury model each year. The company inspects one Basic for every 100 produced, and inspects one Luxury for every 10 produced. The company expects to incur $112,800 of total inspecting costs this year. How much of the inspecting costs should be allocated to the Basic model using ABC costing? a. $28,200 b. $40,800 c. $56,400 d. $95,880 Ans: b, LO: 2, Bloom: AP, Difficulty: Hard, Min: 4, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt E & Focus